WRAL Investigates

Love of college sports gear leads to N.C. sales tax losses

Posted September 7, 2010
Updated September 9, 2010

— North Carolina loses an estimated $162 million in sales tax each year because of Internet purchases, and WRAL Investigates found a large chunk of that money comes from the state's love of college sports.

When customers buy gear from the official online stores of University of North Carolina at Chapel Hill, North Carolina State University, East Carolina University, Appalachian State University and others, they don't pay a penny in sales tax.

The companies that run their online sites are out of state, so despite the fact the schools are state-owned and state-run and a lot of the merchandise comes from stores in North Carolina, the goods are tax-free for fans.

Tar Heel gear, for example, is big business. Boosted by the 2009 national championship, UNC’s athletic deal with Nike and apparel sales brought in nearly $6 million in royalties to support academic programs.

The independently owned Tar Heel Bookstore in Chapel Hill is one of the hot spots to buy anything and everything Carolina. When customers check out in-store or on the book store's website, they pay sales tax.

Manager Christian Campbell said he doesn't believe it's fair that UNC's official site sells tax-free, especially when the supplier is his competitor just a few doors down Franklin Street, Chapel Hill Sportswear.

“I think that it's a competitive advantage that they have,” Campbell said. “But they’re not taking that discount out of their own pocket. It’s coming out of the pocket of the state of North Carolina.”

internet purchases College sports linked to N.C. sales tax losses

N.C. State's official store sits along Wade Avenue in Raleigh. The store supplies all the merchandise for online orders that come through CBS Interactive, which took over the school's web-based business on Aug. 1. Officials quickly realized sales tax wasn't being charged for North Carolina-bound memorabilia.

“We’ve gone back and looked, and we had numerous orders – 300 orders – that were not charged sales tax, so we’re in the process of adding all that up and making sure it gets paid, whether we pay it or CBS pays it,” said store manager Ruth Hearn.

A CBS Interactive spokesman said it’s perfectly legal not to charge sales tax. CBS handles the order, buys the merchandise wholesale, and then sells it to online customers, he said.

“Since CBS does not have business entities in North Carolina, we are not required by law to pay state tax,” the spokesman said.

Still, Hearn said she believes something's not quite right when you can walk into the Go Pack Store and pay sales tax, but shipping orders processed in the back of the store are tax-free.

“I think sales tax should be charged in North Carolina. It’s only fair. It doesn’t make sense it would be charged out here and 2 feet away it not be charged. It’s the same merchandise,” she said.

House Minority Leader Paul Stam says it's an issue the schools or the legislature need to address.

“I think it’s ironic that an agency of the state of North Carolina, which is supported by the taxpayers, is not collecting this tax which is otherwise due if it was selling the same thing from the store at Chapel Hill or Raleigh,” said Stam, R-Wake. “The University of North Carolina, since all of its campuses are here, should insist that its online retailers collect the sales tax.”

Until that happens, competing shops will continue to cry foul for what they see as an uneven playing field.

“If they are doing the fulfillment out of this store on Franklin Street and they're shipping to North Carolina, they should have to pay the same sales tax that we do,” Campbell said.

Due to a push from Go Pack and Wolfpack Marketing, CBS Interactive told WRAL that it will now start collecting sales tax. As for other schools, a spokesman says that will be handled on a case-by-case basis.

It's hard to put a dollar figure on how much money the state has lost just in collegiate apparel. CBS handles sales for seven other in-state schools, including Wake Forest University, which is private.

The Department of Revenue, which has made collecting taxes on online purchases a priority, cited taxpayer confidentiality in declining to comment on the issue.

“Tax liability resulting from relationships between North Carolina entities and online retailers depends on a number of factors, including the terms of any contractual agreement between the retailer and the N.C. entity," spokeswoman Beth Stevenson said in a statement. "In any situation where an item was purchased online and the retailer did not collect sales tax, the buyer is responsible for reporting consumer use tax on their individual tax returns.”

The department is embroiled in a lawsuit with online retail giant Amazon.com over its pursuit of information about purchases made through the website by North Carolina residents or delivered to the state.


This story is closed for comments.

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  • Con Amor brings luv and laughter Sep 10, 2010

    How are they "Losing" money? It was never theirs. Just because they aint getting it, they think their "Losing" it. Hell, I "LOSE" about $400 each pay day. That is money that I worked for, I earned, yet THEY take it! Now THAT is LOSING!

  • NeverSurrender Sep 10, 2010

    "How can the state charge a sales tax on products that don't come from this state? If I travel to South Carolina or Virginia and buy something while I am there, I don't have to come back and pay taxes to NC, too."


    Technically, goods bought elsewhere but are used in North Carolina are subject to the use tax but you're entitled to an offset of the sales taxes paid to the other taxing authority.

    If the sales tax rate in the other state is lower than North Carolina's, then you'd be liable for the difference.

    However, for the minimal amounts they might actually collect by going after everyone, it'd be far more expensive to try to enforce the unenforceable.

    That offset provision was useful in telling DMV to stick their highway use tax where the sun doesn't shine when I moved here...where I came from, the sales tax on vehicles was higher.

    Curiously, they weren't all that keen on refunding the money I overpaid to that prior state... :(

  • karimquick Sep 9, 2010


  • avguildcom Sep 8, 2010

    The question is it fair to place the nexus at the Internet advertising which is the basis of the NC Amazon Tax Law. The revenue department is going hard after Amazon.com because their affiliates provided a ad link but on the other hand the NC Revenue department is ignoring the affiliate relationships with UNC University online stores which are a true affiliate program

    This issue has remained in limbo for over a year while the NC Revenue Department has made very public statements about their efforts to go after Amazon.com. Now North Carolina has to decide if it is worth the millions of dollars in attorney fees to go after money from online purchases of their own websites

    This law was to "Level the playing field". It is "Ground breaking tax Law" and the General Assembly supporters and sponsors passed this law to save the small independent bookstore

    This short,confusing, vague but deliberate wording stashed in the 2009 budget bill has reached out and bitten the hand which wrote it

  • mountainlover Sep 8, 2010

    Bendal1: There are some taxpayers who claim -0- on that line, because they do not make any online purchases. That IS honest. I resent the fact that it is ASSUMED that everyone makes on-line purchases and that the burden of proof appears to be shifting to the taxpayer to prove that he did not. No, if I claim -0- on that line and DOR believes that I made on-line purchases, it is up to them to either present proof that I did make such purchases or accept what I reported.

  • Bendal1 Sep 8, 2010

    Everyone's income tax form has an estimated online purchase value, where an estimated sales tax is added to the amount of income tax you owe. The state's getting their money unless you claim zero online purchases, and since everyone's an honest taxpayer, no one does that, now do you?

  • Z Man Sep 8, 2010

    Even if they collected the $162 million/year, they wouldn't be able to burn it fast enough.

  • Pseudonym Sep 8, 2010

    They refer to it as "lost" money because in their worldview, all money belongs to society as a group, and the government lets you keep a little because the government is sooooo benevolent. In Cullen Browder's mind, we should be on our knees thanking the state of NC for letting us keep the $63 and change out of every $100 in our gross income.

  • The Oracle Sep 8, 2010

    "a large chunk of that money comes from the state's love of college sports."
    $162 million in sales tax means over two BILLION
    dollars in sales. College sports purchases are Not a "large chunck" of that amount.

  • Dreamin of Disney World Sep 8, 2010

    Why do they continually refer to it as "lost" money? This is totally items purchased from other states. You can't lose what's not yours to begin with.